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Since lenders use your income to determine whether or not to lend you money, qualifying for a personal loan with a low income can be difficult. However, every lender sets its own requirements, and some accept lower incomes than others.
There are lenders that don’t set any minimum income requirement and rather look at all your finances when evaluating your application for a loan. If you’re looking for low-income personal loans, consider all of your options to find the lowest-cost loan for you.
Best Low-Income Personal Loans
Summary: Best Low-Income Personal Loans
What Are Low-Income Personal Loans?
Low-income personal loans are personal loans with low monthly or annual income requirements. Depending on the lender, you may still need to meet requirements for credit, income and other financial criteria, but having a low income won’t disqualify you from the loan.
You can use a personal loan for a wide variety of purposes, including paying for home renovations, medical expenses or consolidating high-interest debt. Personal loans offer a lump sum upfront that you repay back over time, usually at a fixed interest rate.
If you’re applying for a personal loan with bad credit and low income, you may end up with a high interest rate. Most lenders have interest rates that don’t exceed 36%, but there are other lenders that offer loans with much higher interest rates.
Before accepting any personal loan—and in particular, those that are intended for borrowers with low incomes—be sure you understand the terms and costs of the loan.
Tips To Compare Low-Income Personal Loans
Since interest rates and terms vary by lender, shop around to find the best loan option for you. As you search for a loan, here are some important features to consider:
- Interest rate. Your interest rate in part determines how much it’ll cost to borrow the loan. Finding a loan with the lowest interest rate reduces your borrowing costs.
- Fees. Fees can increase your cost of borrowing. Common personal loan fees include origination or administrative fees, as well as prepayment and late fees. Comparing lenders using an annual percentage rate (APR) allows you to see what a loan’s full cost would be, including interest and fees.
- Loan amounts. If you have a low income, lenders may be less likely to loan you a large sum of money. Consider whether or not a loan covers all your needs as you compare lenders.
- Repayment terms. Personal loan terms often range from one to seven years. Your repayment terms determine your monthly payment and total interest charges. Finding a lender with repayment terms that work for you will help you manage repaying your loan.
- Collateral requirements. While most personal loans are unsecured, some lenders also offer secured loans, which are backed by collateral. It may be easier to qualify for a secured loan if you have a low income, but you run the risk of losing your asset if you fall behind on loan payments.
- Repayment flexibility. Finally, find out whether the lender offers any flexibility if you have trouble paying your loan, such as a payment modification program if you lose your job.
How To Get a Loan With Low Income
If you’re looking for a personal loan with low income, you may need to be flexible about the lender you choose and the loan amount. Some lenders may be out of reach and others might offer lower loan amounts based on your low income.
Before borrowing, take a close look at your budget, particularly your monthly earnings and bills.
Use a personal loan calculator to estimate monthly payments on a personal loan and ensure payments would realistically fit your budget.
After determining your credit profile and financial needs, look for lenders where you can meet the minimum requirements. Some lenders allow you to pre-qualify, which doesn’t impact your credit score and can give you an idea of the rates and terms you could qualify for.
With a low income, finding a lender where you meet the requirements for a loan can be the most challenging step in the process.
How To Qualify for a Loan With Low Income
The qualification requirements for low-income loans will vary by lender, but they typically involve the following factors:
- Income. Lenders want to see that you have regular income or an offer of employment to ensure you’ll have the means to pay back your loan. As mentioned, some lenders accept lower incomes than others and lenders may also look at alternative income sources, such as child support, Social Security and workers’ compensation.
- Credit score. You’ll also need to meet credit requirements, which vary among lenders. If you have weak or thin credit, you may still have loan options, but you might face higher interest rates and loan fees. Review a free copy of your credit report from AnnualCreditReport.com. If you find any errors, submit a dispute with the three major credit bureaus.
- Debt-to-income (DTI) ratio. Lenders also consider your DTI ratio, or how your monthly debt payments compare to your income. Most prefer a DTI below 36%, but this can vary by lender. Reducing your DTI can help you qualify for a loan.
- Age and citizenship criteria. You typically need to be at least 18 years old to borrow a personal loan. Some lenders require that you’re a U.S. citizen or permanent resident, while others accept international applicants who have a U.S. Social Security number.
How To Apply For a Personal Loan
You can apply for a personal loan directly on your chosen lender’s website. Although the specific steps may vary, here’s the process you’ll typically take:
- Shop around. Once you know your credit score and the loan amount you need, start searching for lenders where you meet the minimum lender requirements.
- Pre-qualify. Many lenders let you check your rates through pre-qualification, which allows you to review potential loan offers without impacting your credit. Pre-qualifying with several lenders can help you find the best personal loan for you.
- Submit an application. Once you’ve picked a loan, fill out and submit an official application. Along with providing your personal and financial details, you may need to upload verifying documentation, such as pay stubs or an employment offer and identification.
- Receive your loan and start repayment. If the lender approves your application, it will send the personal loan funds to you. Some lenders can send a loan to your creditors directly if you’re using the loan for debt consolidation. Review your loan agreement to find out when your monthly payments are due.
Alternatives to Personal Loans With Low Income
If a low income is making it difficult to qualify for a traditional personal loan, here are some alternatives worth exploring:
- Payday alternative loan. A payday alternative loan (PAL) from a credit union can be a great option if you need a small loan. Loan amounts max out at $1,000 or $2,000 and interest rates don’t exceed 28%.
- Collateral or co-signer. Applying for a secured loan or applying for a loan with a co-signer may make it easier to qualify. Note that your co-signer will share responsibility for the loan and their credit will be impacted by how it’s repaid.
- 0% APR credit card. If you can qualify for a credit card with a 0% APR promotional period can be a good option since you won’t have to pay interest during the promotional period. Keep in mind, have a plan to repay any debt you take on as once the promotional period ends, interest charges can be very high.
Payday loans are also available to borrowers with low income (and may not require a credit check), but they’re a risky option. They come with exorbitant rates and fees—APRs may total 400% or higher—and you usually need to pay them back on your next payday.
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